65 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 Respecting the New York Convention By William W. Park* I. Rights in search of remedies In theory, treaty commitments remain a foundation of international law, often expressed in the adage pacta sunt servanda (agreements are to be kept).1 In practice, however, some treaty violations remain without realistic sanctions. Here, as elsewhere, theory and practice diverge. When national judicial decisions interfere with respect for the New York Convention,2 the availability of remedies remains highly fact-specific.3 In some instances, investment treaties offer a way to close the gap between theory and practice, permitting investors to bring private actions against a host country rather than relying on government-to- government measures. Not all failure to respect the New York Convention fits within the framework of investment treaties. Many clear Convention violations remain without remedy, due to the absence of any relevant ‘investment’ providing the jurisdictional hook on which to hang a claim. The contours of national respect for the New York Convention might be addressed by comparing two strands of analysis. The first, represented by the ICSID decision Saipem v. Bangladesh, implicate arbitral tribunal jurisdiction with respect to domestic court decisions that allegedly run afoul of the New York Convention. By contrast, in another line of cases no practical mechanism seems to exist for challenge to the invocation of parochial American procedure to defeat award recognition under the Convention. The modest aspiration of this note lies in an exploration of how and why the two types of cases differ. As we shall see, a key distinction lies in the existence of an ‘investment’ * Professor of Law, Boston University, USA; General Editor, 2 Arbitration International. Copyright © William W. Park, 2007. For a decision confirming, in the context of an investment treaty, that governmental measures include judicial decisions, 1 see Loewen Group, Inc. & Raymond L. Loewen v. USA, ICSID The duty to respect commitments appears early in Western Case No. ARB (AF)/98/3, Interim Award on Jurisdiction, law, expressed in Justinian’s Code as sancimus nemini licere 5January 2001. adversus pacta sua venire et contrahentem decipere (we shall not allow anyone to contravene his agreements and 3 thereby disappoint [or deceive] his contractor), Code Just. In summary, Article II of the New York Convention provides 2.3.29pr (Justinian 531). Medieval canon lawyers abandoned that national courts should respect the agreement to requirements of form to hold all agreements binding unless arbitrate, and Article III imposes a duty to recognize and illegal or immoral. English common law disagreed, and enforce awards. See Convention on the Recognition and insisted on either consideration or a formal deed. The Enforcement of Foreign Arbitral Awards, 10 June 1958, corollary principle that treaties bind so long as things remain 3U.S.T. 2517, 330 U.N.T.S. 38. Twenty-four countries unchanged has been expressed as the doctrine of rebus sic originally signed the Convention. The rest have joined by stantibus. On treaty commitments, see I. Brownlie, Principles accession or succession. The most recent ratifications of Public International Law, 6th ed. (Oxford University Press, (United Arab Emirates, Montenegro, Gabon, Bahamas and 2003) at 579–609; J.L. Brierly, The Law of Nations, 6th ed. Marshall Islands) bring to 142 the total number of countries by Humphrey Waldock (Oxford University Press, 1963) at bound by the treaty. 317–45; F.A. Mann, Studies in International Law (Oxford University Press, 1973) at 327–59. 66 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 to trigger arbitration of treaty breaches by the country allegedly failing to respect the New York Convention. II. Recourse to investment treaties: Saipem v. Bangladesh A. The underlying dispute In March 2007, an arbitral tribunal opened the door to a damages award for breach of the New York Convention.4 An Italian construction company (Saipem) had contracted to build a gas pipeline in northeastern Bangladesh. The counterparty was a State entity, the Bangladesh Oil Gas & Mineral Corporation, commonly called Petrobangla. Ultimately, the transaction went sour. The contractor claimed additional costs that Petrobangla refused to pay. Controversy also arose with respect to return of a warranty bond and retention monies requested by the Italians. Saipem referred its claim to arbitration, pursuant to a clause in the parties’ agreement that provided for dispute resolution in Dhakar under the Rules of the International Chamber of Commerce (ICC). An arbitral tribunal was constituted,5 and proceeded to render awards in favor of Saipem with respect to jurisdiction, liability and quantum of damages.6 During and after the proceedings, courts in Bangladesh made various orders with respect to the arbitration. The Supreme Court issued an injunction restraining Saipem from continuing with the ICC arbitration. Ultimately, that Court ruled that there was ‘no award in the eye of the law’, finding that the arbitral proceedings were illegal and without jurisdiction. B. The ICSID proceeding In response to the alleged interference with the ICC arbitration by Bangladeshi courts, Saipem filed a second arbitration, this one under the rules of the International Centre for Settlement of Investment Disputes (ICSID). This new claim (for US$ 12.5 million plus relief concerning the warranty bond) was brought pursuant to the bilateral investment treaty between Bangladesh and Italy (the Italo-Bangladeshi BIT),7 with the respondent as the Republic of Bangladesh itself, rather than the State agency. Article 5 of the BIT provides that investments may not be expropriated (nor subject to measures equivalent to expropriation) without prompt, adequate and effective compensation. 4 6 Saipem S.p.A. v. People’s Republic of Bangladesh, ICSID In May 2003, the tribunal found Petrobangla to have breached Case No. ARB/05/07, 21 March 2007. The tribunal was its obligations and awarded Saipem US$ 6 million plus € composed of Professor Kaufmann-Kohler, Professor Christoph 110,000 plus interest and return of the bond. Schreuer and Sir Philip Otton. 7 5 Agreement of 20 March 1990 between Government of the The eminent tribunal included Dr Werner Melis as chairman, Republic of Italy and Government of the People’s Republic of and Professor Riccardo Luzzatto and Professor Ian Brownlie. Bangladesh on the Promotion and Protection of Investments. The laws of Bangladesh were applicable to the merits of the The treaty entered into force on 20 September 1994. dispute. English was the language of the arbitration. 67 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 Contending that immaterial rights can be expropriated, Saipem asserted that Bangladesh had expropriated not only its contract claims, but also an entitlement to arbitrate under the ICC Rules. According to Saipem, this was covered by the Italo-Bangladesh BIT, which in Article 1 extends its protection to any ‘right accruing by law or by contract’. In response, Bangladesh raised jurisdictional objections based on both the BIT itself and Article 25 of the ICSID Convention, which extends jurisdiction to ‘any legal dispute arising directly out of an investment’ between the host State and the foreign investor. The ICSID tribunal accepted jurisdiction.8 In so doing, the arbitrators had to address multiple questions related to the nature of investments and the type of fact patterns capable of constituting an expropriation. Noting that the notion of investment in the Italo-Bangladeshi BIT includes ‘credit for sums of money’,9 the tribunal construed those words to cover rights under an award ordering payment of amounts due to the prevailing party. In so doing, the tribunal focused on the rights arising out of the underlying contractual relationship. These rights were found to have been crystallized by the ICC award.10 Consequently, the arbitrators did not need to make a final ruling on the argument that the arbitration agreement itself constituted a financial right covered by Article 1 of the BIT.11 Having determined that Saipem had made an investment as defined under the Italo- Bangladeshi BIT, the tribunal went on to find that the facts as alleged by the claimant were capable of constituting an expropriation under Article 5 of the BIT. The essence of the allegation was that an unlawful disruption and a de facto annulment of the ICC arbitration by Bangladeshi courts deprived Saipem of the amounts awarded in the ICC arbitration, thus amounting to an illegal expropriation. Finally, the tribunal rejected the contention that the substance of Saipem’s claim constituted a private contract action rather than an investment treaty claim. Bangladesh had argued that the claim was nothing more than a contract action ‘dressed as a treaty claim’. In response, the tribunal noted that Saipem did not request relief under its agreement with Petrobangla, but rather claimed that the alleged breach of the New York Convention constituted a violation of the protection mandated for foreign investors under the investment treaty.12 The tribunal determined only that the alleged violation of the New York Convention could constitute a breach of the investment treaty. Whether the conduct of the Bangladeshi courts did in fact amount to a ‘denial of justice’ (thereby breaching treaty protections against improper expropriation) was left to the merits phase of the arbitration. Doubtless the award will serve as a springboard for future claims related to the New York Convention. 8 Jurisdictional Award of 21 March 2007, ICSID Case. No. ARB/ 05/07. 9 Italo-Bangladeshi BIT, Art. 1(1)(c). 10 Jurisdictional Award of 21 March 2007 at paras. 125–127. 11 Ibid. at para. 128. 12 ‘[T]he essence of Saipem’s case is that the courts of Bangladesh acted in violation of the New York Convention ...’ Ibid. at para. 141. 68 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 Not all State practices that disregard the Convention will be actionable, however. Some investment in the offending country must provide a jurisdictional underpinning for actions against the breaching State. Breach without remedy will likely continue in instances exemplified by certain American decisions that invoke notions of forum non conveniens and lack of ‘minimum contacts’ to justify failure to recognize arbitral awards. To these cases we now turn our attention. III. Jurisdiction and forum non conveniens A. An American trilogy In many countries, implementation of international conventions implicates an intricate interplay of the treaty text with constitutional mandates and federal statutes. This complexity presents itself crisply in three American federal appellate decisions: Base Metal,13 Glencore Grain14 and Monégasque de Réassurances,15 which under one line of argument place the United States in breach of its obligations under the New York Convention. In each instance, the court dismissed a petition to confirm a foreign arbitral award subject to the New York Convention. In the first two, the courts concluded that they lacked personal jurisdiction over the foreign respondent, and thus could not enforce the awards. The third case, Monégasque de Réassurances, decided that award confirmation had been sought in an unsuitable forum and thus had to be refused. With respect to all of these cases, any investment treaty remedy for breach of the New York Convention (a matter to be explored below) appears conceptually far-fetched. Bilateral and multilateral investment treaties, as well as the ICSID Convention, presuppose an investment within the country whose responsibility has been invoked. Without some investment, the jurisdictional predicate for arbitration remains absent. Unlike the Saipem case, no investment had been made in the United States by the prevailing party in the arbitrations which gave rise to the trilogy of above-cited cases. Indeed, the heart of these decisions lies in the court’s inability to find connections between the arbitration’s winner and the United States such as to justify (under American principles) consideration of a recognition request. 13 Base Metal Trading, Ltd. v. OJSC ‘Novokuznetsky Aluminium in Moscow against the government of Ukraine and a Ukrainian Factory’, 283 F.3d 208 (4th Cir. 2002), declining to confirm an corporation. The decision rested on American doctrines award made in Russia against a Russian manufacturer that regarding when courts are suitable to hear a dispute, was deemed to lack ‘minimum contacts’ with the forum. In notwithstanding that it might otherwise have jurisdiction. See Base Metal the respondent allegedly owned assets within the Piper Aircraft Co. v. Reyno, 454 U.S. 235 at 248–49 (1981). forum, while such was apparently not the case in the other The appropriateness of the court depends on convenience to two cases Glencore and Monégasque de Réassurances. the litigants as well as factors related to the public interest in 14 proper administration of justice. Whether a court is Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., inconvenient constitutes one element among many that must 284 F.3d 1114 at 1122 and note 5 (9th Cir. 2002), upholding a be balanced in determining that the forum is (or is not) an district court decision refusing to recognize an award made appropriate one to hear the case. against an Indian rice exporter deemed not to be present in or having assets in the district). 15 Monégasque de Réassurances S.A.M. v. NAK Naftogaz of Ukraine, 311 F.3d 488 at 498–501 (2d Cir. 2002), declining on grounds of forum non conveniens to enforce an award made 69 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 B. Interplay of national law and the New York Convention These controversial cases highlight the contours for interaction of the New York Convention and national law. All three decisions came as a surprise to an arbitration community, among which considerable scholarly comment has been generated.16 Moreover, a report by the Association of the Bar of the City of New York suggests that a sound basis exists for enforcement of New York Convention awards solely on the basis of assets located within the forum.17 To understand what happened, one must recall that the US Constitution speaks of ‘supreme law of the land’ with respect to three (not one) sources of legal authority: the Constitution itself, federal statutes, and international treaties.18 While the Constitution has long been deemed to trump other sources of law, 19 the interaction between treaties and statutes remains less clear.20 Although not free from scholarly debate,21 acts of Congress and treaties would normally remain on the same level. One might prevail over the other due to a ‘later in time’ rule or some indication of congressional intent, but not to any inherent value derived from status as either treaty or legislation. Conflict over application of treaties has been addressed in contexts as mundane as real estate taxation22 and as emotionally charged as capital punishment.23 16 See e.g. W.W. Park & A. Yanos, ‘Treaty Obligations and effect to an earlier treaty between the United States and National Law’ (2006) 58 Hastings Law Review 251; Great Britain providing for the protection of birds that traveled J.E.Neuhaus, ‘Current Issues in the Enforcement of between the United States and Canada. International Arbitration Awards’ (2004) 36 University of Miami 21 Inter-American Law Review 23; L.J. Silberman, ‘International See V. Kesavan, ‘The Three Tiers of Federal Law’ (2006) 100 Arbitration: Comments from a Critic’ (2002) 13 The American Northwestern University Law Review 1479 (arguing that Review of International Arbitration 9,16; R.J. Weintraub, statutes are superior to treaties irrespective of time, based ‘Jurisdictional Problems in Enforcing Foreign Arbitral Awards’, on what that author called the Constitution’s ‘lexical priority’ in The International Arbitration News (Summer 2002) at 2; Article VI, Section 2, which lists Constitution, statutes, and P.Ivanova, Note, ‘Forum Non Conveniens and Personal treaties in just that order). Jurisdiction: Procedural Limitations on the Enforcement of Foreign Arbitral Awards Under the New York Convention’ 22 (2003) 83 Boston University Law Review 899. See Foreign Investment in Real Property Tax Act, Pub. L. No.96-499, § 1125 94 Stat. 2682 at 2690 (codified in 17 scattered sections of 26 U.S.C.), which provides that no The International Commercial Disputes Committee of the treaty shall exempt or reduce the tax otherwise imposed on Association of the Bar of the City of New York, Lack of gain by foreigners from disposition of American real estate. Jurisdiction and Forum Non Conveniens As Defenses To The See generally D.F. Vagts, ‘The United States and Its Treaties: Enforcement Of Foreign Arbitral Awards (Apr. 2005), reprinted Observance and Breach’ (2001) 95 American Journal of (2006) 15 The American Review of International Arbitration International Law 313. 407 (hereinafter ‘New York City Bar Report’). The Report suggests that the holding in Glencore is correct, but 23 questions the reasoning and result in Base Metal. The Report See Breard v. Greene, 523 U.S. 371 at 376 (1998), where a also argues that an agreement to arbitrate in one New York Paraguayan citizen sought to invalidate his murder conviction Convention country is not sufficient to constitute consent to based on the State of Virginia’s failure to advise him of a right enforcement in other Convention States, and that forum non to the assistance by the Paraguayan consul, as required in conveniens should not generally serve as a ground for the 1963 Vienna Convention on Consular Affairs. The Supreme dismissing an action to confirm or enforce a Convention Court declined a petition for writ of certiorari, noting inter alia award. that obligations under the Vienna Convention had been preempted by statute. As this article goes to publication, the 18 Supreme Court is considering similar questions that arose in Article VI, Section 2 of the US Constitution reads as follows: Medellin v. Texas (cert. granted, 127 S.Ct. 2129, 2007), where ‘The Constitution, and the Laws of the United States which a Mexican national was convicted of capital homicide for gang shall be made in Pursuance thereof; and all Treaties made, or rape and murder of two teenage girls. Analogous claims by which shall be made, under the Authority of the United States, other Mexican nationals awaiting execution were heard by the shall be the supreme Law of the Land . . .’ International Court of Justice in Avena and other Mexican 19 Nationals (Mexico v. United States of America), 2004 I.C.J. Reid v. Covert, 354 U.S. 1 at 16–17 (1957); Asakura v. City of No. 128, (2004) 43 International Legal Materials 581, which Seattle, 265 U.S. 332 at 341 (1924); Geofroy v. Riggs, 133 found that the United States breached Article 36 of the Vienna U.S. 258 at 267 (1890); Mayor of New Orleans v. United Convention on Consular Relations, a decision held non- States, 35 U.S. 662 at 736–37 (1836); Restatement (Third) of binding by Texas courts. the Foreign Relations Law of the United States § 115(3) (1987). 20 See generally Missouri v. Holland, 252 U.S. 416 at 435 (1920), upholding the Migratory Bird Treaty Act of 1918, which gave 70 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 According to rules of international law, neither a constitutional mandate nor the enactment of a statute provides an excuse for a treaty violation.24 Prevailing opinion holds that an act wrongful under the law of nations remains so even if a nation’s internal law deems otherwise.25 Observers are thus led to a closer examination of what the New York Convention has to say about award recognition. C. Construing the New York Convention 1. Rules of procedure where relied upon The New York Convention mandates award recognition subject to a narrowly drafted litany of defences.26 None of these includes either lack of ‘minimum contacts’ (the ground for non-recognition in Base Metal and Glencore Grain) or forum non conveniens (invoked in Monégasque de Réassurances). The Convention does, however, provide in Article III for award recognition ‘in accordance with the rules of procedure of the territory where the award is relied upon’. Until recently, most observers considered that this provision related to the form of enforcement, not the conditions for enforcement.27 Contracting States certainly possess discretion with respect to minor ministerial matters, such as the amount of filing fees or rules about where enforcement motions must be brought. However, no clear support exists for the proposition that the ‘procedure where relied upon’ language was intended to serve as a backdoor escape from recognition of legitimate foreign awards. To illustrate, determining where to seek award enforcement takes on a special dimension in countries with a federal system. In the United States, enforcement motions are normally brought in federal (not state) courts.28 By contrast, in Switzerland such actions will be heard by the cantonal (not federal) judiciary.29 The difference relates simply to enforcement modalities, not conditions that serve to bar recognition itself. 24 See e.g. Article 27 of the Vienna Convention on the Law of Sons v. Toys ‘R’ Us, Inc., 126 F.3d 15, 23 (2d Cir. 1997). With Treaties, 23 May 1969, 1155 U.N.T.S. 331 (‘A party may not respect to awards not covered by the New York Convention, invoke the provisions of its internal law as justification for its other standards would apply. See e.g. International Bechtel failure to perform a treaty. This rule is without prejudice to Co. v. Department of Civil Aviation of Dubai, 360 F. Supp. 2d article 46.’). 136 at 137–38 (D.D.C. 2005), denying enforcement to an award rendered in Dubai, before the United Arab Emirates 25 became a party to the New York Convention. Under Article III of the International Law Commission’s Draft Articles on Responsibility of States for Internationally 27 Wrongful Acts, ‘[t]he characterization of an act of a State as See A.J. van den Berg, The New York Arbitration Convention internationally wrongful is governed by international law. Such of 1958: Towards a Uniform Judicial Interpretation (Deventer: characterization is not affected by the characterization of the Kluwer, 1981), hereinafter ‘Van den Berg’, at 236–41. same act as lawful by internal law’. Report of the 28 International Law Commission to the General Assembly, 56 In addition, a respondent may remove an enforcement action U.N. GAOR Supp. (No. 10) at 1, U.N. Doc. A/56/10 (2001), from a state to a federal court. See 9 U.S.C. §§ 203–205. hereinafter ‘ILC Report’; see also Restatement (Third) of the Foreign Relations Law of the United States § 111 cmt. a 29 (1987) (‘failure of the United States to carry out an obligation On the enforcement of a foreign award under Article 194 of [of international law] on the ground of its unconstitutionality the Swiss Private International Law Statute (‘LDIP/IPRG’), see will not relieve the United States of responsibility under P.M. Patocchi & C. Jermini, ‘Foreign Arbitral Awards’ in international law’). S.Berti, ed., International Arbitration in Switzerland (2000) at 625–75. Foreign arbitral awards are enforced in Switzerland in 26 the same way as foreign judgments in cantonal courts. By These defences relate both to procedural fairness (invalid contrast, a motion to set aside an award in an international arbitration agreement, lack of opportunity to present one’s arbitration with its seat within Switzerland must be brought case, arbitrator excess of jurisdiction, and irregular before the Federal Supreme Court in Lausanne pursuant to composition of the arbitral tribunal) and to the forum’s public LDIP/IPRG, Art. 191. policy. Different considerations may obtain in respect to awards rendered in the United States, even when the New York Convention applies because the dispute implicates international commerce or involves foreign parties and is thus considered ‘non domestic’. See Yusuf Ahmed Alghanim & 71 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 Read in context, the ‘rules of procedure’ language in Article III of the New York Convention gives contracting States latitude in fashioning the practical mechanics of award enforcement. The provision indicates that the process for obtaining award enforcement or recognition is flexible, being determined by local procedures. This language relates to how recognition will be granted, not whether recognition will be granted at all.30 2. The approach in Monégasque de Réassurances The decision in Monégasque de Réassurances took a different view, however, seizing upon the reference to ‘rules of procedure’ to justify invocation of forum non conveniens, and recognizing limitations only with respect to measures that discriminate against foreign awards when compared with domestic arbitral decisions.31 In taking this approach, the court included an extended discussion of the United States Supreme Court characterization of forum non conveniens as ‘procedural rather than substantive’, emphasizing that the doctrine is applied in the enforcement of domestic awards as well. The conclusion in Monegasque was that the Convention’s only limitation on procedural rules was ‘the requirement that the procedures applied in foreign cases would not be substantially more onerous than those applied in domestic cases’.32 3. Drafting history In concluding that the New York Convention imposes no limitations other than non- discrimination on procedural rules at the enforcement forum, the court in Monégasque de Réassurances seems to have gone astray as a matter of both logic and history. Relying on the drafting history of the New York Convention, the court suggested that the non- discrimination language was proposed by Belgium, and supported by the United States, only after efforts to establish uniform standards had failed.33 History does not support the court’s conclusions. To the contrary, the debate on ArticleIII confirms that the reference to ‘rules of procedure’ relates simply to formalities for an application to confirm or enforce, including fees and the pro forma structure of the request. There is no evidence that the language was intended to incorporate doctrines that permit or require courts to prune their dockets in normal commercial litigation. As an initial matter, it is important to remember that the relevant language in Article III of the Convention originated not with the Belgian delegate,34 or any other delegate, but 30 33 To suggest an admittedly imperfect analogy, universities have The chief source of the Second Circuit’s information seems to procedures whereby admitted students must pay tuition have been a law review article, L.V. Quigley, ‘Accession by before they begin their studies. Individuals failing to follow the United States to the United Nations Convention on the these procedures will not normally be registered. However, Recognition and Enforcement of Foreign Arbitral Awards’ registration formalities are not intended to include a second (1961) 70 Yale Law Journal 1049. set of entrance requirements. A student having already met 34 standards for admission would be understandably perplexed Indeed, the comments of the Belgian delegate actually run to find, on arrival at the registrar’s office, that s/he was counter to the argument that Article III of the draft required to sit for a set of entrance exams. Likewise, the New Convention was concerned principally with making the award York Convention gives no hint that a contracting State may operative. ‘In reply to the French representative, he explained create roadblocks to recognition of otherwise valid awards. that the procedures which, under the Belgian proposal, would 31 be identical with those for national awards included not only Monégasque de Réassurances v. NAK Naftogaz of Ukraine, the modalities of enforcement but also those necessary to 311 F.3d 488 (2d Cir. 2002) at 496. secure enforcement, such as the rules governing the 32 presentation of documents.’ U.N. Doc. E/CONF.26/SR.10 at 7 Ibid. at 496. (27 May 1958). 72 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 was instead taken verbatim from the predecessor to the New York Convention.35 Article1 of the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards provided that ‘an arbitral award . . . shall be recognised as binding and shall be enforced in accordance with the rules of procedure of the territory where the award is relied upon’.36 In contrast, the Belgian proposal that the Second Circuit referred to would have resulted in a substantially different version of the New York Convention. Each country would have enforced foreign arbitral awards in the identical manner as for domestic awards.37 More significantly, the comments from delegates most closely involved with the adoption of the present Convention’s wording show an expectation at odds with the Second Circuit’s interpretation of that article. For example, the representative from the United Kingdom (author of the prohibition on fees more onerous than those applicable to domestic awards) explained that the purpose of his proposal was to ensure that a foreign award that met the conditions of the Convention should be ‘enforceable without unnecessary inconvenience’.38 Similarly, the report of the Secretary General of the United Nations Economic and Social Council highlights that reference to ‘rules of procedure’ was not an attempt to incorporate by reference all of the arcane rules of procedure applicable in each jurisdiction in which the Convention would be applicable, but rather to refer to the basic method by which a party must file an application to have an arbitral award recognized or enforced.39 Thus, the Convention’s drafting history indicates that it was not meant to authorize courts to provide open-ended grounds on which to dismiss recognition of otherwise valid awards. To the contrary, the prevailing view supports the exclusivity of the reasons for refusal of recognition as set forth in Articles V and VI of the Convention, which relate to basic procedural fairness, substantive public policy and adjournment in deference to foreign court proceedings.40 Although a Convention country can certainly set up ministerial conditions for award enforcement, such as making the application to the correct court or paying a reasonable filing fee, the Convention drafters did not expect the recognition forum to establish outright procedural bars to award confirmation. D. National practice The practice of countries other than the United States provides little support for the acceptance of local procedural impediments to enforcement of New York Convention 35 39 Van den Berg, supra note 27 at 234. Comments on Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Note by the 36 Secretary-General, U.N. Doc. E/CONF.26/2 (6 Mar. 1958) at 1927 Geneva Convention, Art. I. ¶¶ 7–8. 37 40 See U.N. Doc. E/CONF.26/SR.10 at 5, recording the following: Yusuf Ahmed Alghanim & Sons v. Toys ‘R’ Us, Inc., 126 F.3d ‘Mr. [H]erment (Belgium) said that the rules of procedure 15 at 23 (2d Cir. 1997) (‘the Convention is equally clear that governing the two types of award should be not only when an action for enforcement is brought in a foreign state, comparable but identical. The articles should therefore state the state may refuse to enforce the award only on the explicitly that once it had been established that a foreign grounds explicitly set forth in Article V of the Convention’); award met the requirements of the Convention, the régime Restatement (Third) of the Foreign Relations Law of the United applicable to its enforcement, including the issue of the States § 488 cmt. a (1987) (‘[t]he defenses to enforcement of enforcement order, would be the one governing domestic a foreign arbitral award set forth in [Art. V of the Convention] awards.’ An improper spelling lists the delegate’s name as are exclusive’). ‘Ferment’ on page 5, although later references (such as page7) correctly indicate Mr Herment. 38 Ibid. at 7 (comments of Mr Wortley). 73 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 awards. Except for claims against foreign sovereigns,41 few non-American jurisdictions condition enforcement of Convention awards on a link with the transaction, the parties or their property.42 Many Western legal systems exercise jurisdiction without regard to the type of minimum contacts required by the United States,43 and international law generally prohibits invocation of a country’s internal law to eviscerate its international agreement.44 E. Public interests and proper parties Unlike limits on personal jurisdiction, the doctrine of forum non conveniens does not rest on constitutional underpinnings,45 but derives instead from a court’s inherent power to manage its own docket.46 Once described as ‘a supervening venue provision’ that comes into play when a trial court declines jurisdiction,47 forum non conveniens implicates a multistage analysis. No level of the analysis implicates bright lines.48 Determining whether to honor the plaintiff’s choice of forum requires first a finding on whether an adequate alternative forum exists. If so, courts may proceed to balance what have been called ‘the private and public interests’ that bear on where the case should be adjudicated.49 Consequently, courts do not dismiss on forum non conveniens grounds when no adequate alternative forum exists, or when a balancing of interests indicates that dismissal would not be appropriate.50 41 Questions of sovereign immunity pose different concerns, resisting enforcement has no residence or place of business since the objection of the respondent State relates to in Germany). jurisdiction under the principle of international (not just local) 44 law. For example, before Swiss courts will execute an award See Restatement (Third) of the Foreign Relations Law of the against the assets of a foreign sovereign, an ‘internal United States, § 311(3) (1987). For a discussion of a related connection’ (Binnenbeziehung) must exist between (but conceptually distinct) point, see J. Paulsson, ‘May a Switzerland and either the parties or the transaction. See State Invoke its Internal Law to Repudiate Consent to Circulaire du Département fédéral de justice et police, International Commercial Arbitration?’ (1986) 2 Arbitration Jurisprudence des autorités administratives de la International 90. Confédération 224 (26 Nov.1979). The principle was applied to 45 one aspect of the LIAMCO saga. See Socialist Libyan Arab See generally E.L. Barrett, Jr., ‘The Doctrine of Forum Non Popular Jamarihiya v. Libyan American Oil Co., German Conveniens’ (1947) 35 California Law Review 380 at 386–89. Federal Court (Bundesgerichtshof), 19 June 1980, (1981) 20 International Legal Materials 151 at 159–60. See also 46 G.R.Delaume, ‘Economic Development and Sovereign See Monégasque de Réassurances S.A.M. v. NAK Naftogaz Immunity’ (1985) 79 American Journal of International Law of Ukraine, 311 F.3d 488 at 498–501 (2d Cir. 2002). 319 at 340. 47 42 See also American Dredging Co. v. Miller, 510 U.S. 443 at 453 New York City Bar Report, at 6–7, suggests that several (1994); Piper Aircraft Co. v. Reyno, 454 U.S. 235 at 241 countries (including China and Japan) impose such (1981). For a recent discussion of the doctrine as a means to restrictions. The author’s own reading of the cited authorities, defend against lawsuits in federal courts, see D.W. Rivkin & however, leads to a more nuanced conclusion. General S.M. Grosso, ‘Forum Non Conveniens: A Doctrine on the principles of judicial jurisdiction and service of process do not Move’ (2004) 5 Business Law International 1. necessarily control in situations governed by an international 48 treaty. Moreover, the Report itself notes that the laws of See Gross v. British Broadcasting Corporation., 386 F.3d 224 many countries (including France, Germany, Italy and at 230 (2d Cir. 2004). Sweden) enforce awards notwithstanding the absence of 49 connection between the award debtor or his property and any Piper Aircraft Co., 454 U.S. at 246 (emphasis added). particular location within the forum. Ibid. at 7, note 26. As a practical matter, of course, it is difficult to prove the 50 negative. One is not likely to find court decisions stating ‘we In Iragorri v. United Technologies Corp., the Second Circuit enforce this award even though it has nothing to do with our considered en banc the degree of deference that should be forum’. afforded to a plaintiff’s choice of forum, when that forum is different from the one in which the plaintiff resides, 274 F.3d 43 65 at 71 (2d Cir. 2001). The court of appeals instructed the See French Code civil, Art. 14 (jurisdiction based on the nationality of the plaintiff); German Zivilprozeßordnung district courts to apply a ‘sliding scale’ of deference to that choice, explaining that US courts ‘give deference to a (‘ZPO’), Art. 23 (jurisdiction on the basis of property alone); plaintiff’s choice of her home forum because it is presumed to English Civil Procedure Rules, Part 6.20 (jurisdiction based on applicable substantive law). Compare the position in be convenient’, a presumption that is much less reasonable when the plaintiff is foreign. Ibid. at 71. Consequently, the Switzerland, where the applicability of Swiss law requires greater the plaintiff’s or the lawsuit’s bona fide connection to courts to accept jurisdiction in the context of a forum selection clause. See Swiss LDIP/IPRG, Art. 5. See also ZPO, the United States and to the forum of choice, and the more considerations of convenience favour conduct of the lawsuit Art. 1062 (providing simply that when awards are made in the United States, the more difficult will be dismissal for outside Germany, enforcement competence lies with the Berlin Kammergericht (Higher Regional Court) when the party forum non conveniens. 74 ICC International Court of Arbitration Bulletin – Vol. 18/No. 2 – 2007 Under a proper application of these principles, the instances will be few and far between when the doctrine of forum non conveniens justifies dismissal of a motion to confirm a New York Convention award. The breach of a treaty obligation is no light matter, and the United States has a vital public interest in following through with its international commitments. Treaties should normally outweigh the other interest factors (public and private) that militate in favor of dismissal.51 Rare as they may be, some instances will exist when courts may be justified in refusing, on forum non conveniens grounds, to recognize an award covered by the New York Convention. One example might be found in the need to determine what entities were properly subject to the arbitrators’ jurisdiction—a problem that existed in the very facts that gave rise to Monégasque de Réassurances.52 We remember that the court upheld dismissal of an action brought by a foreign reinsurer that had been subrogated to rights against a Ukrainian entity called Naftogaz, which was arguably an instrumentality of the Ukrainian government. On the face of the arbitration agreement, the State was not a party to the arbitration agreement. The question of who is the proper party is not uncommon to international or domestic arbitration, and arises frequently in connection with actions against so-called non- signatories.53 Courts must often determine whether arbitration is appropriate with respect to a person that did not agree to arbitrate. Parent-subsidiary relationships provide fertile ground for disagreements,54 leading courts occasionally to extend the burdens and benefits of an arbitration clause. In such instances, courts must be rigorous in their investigation of the parties’ real intentions on the existence or scope of arbitral authority,55 resisting the temptation to apply vague verbal formulae independent of the commercial context.56 In Monégasque de Réassurances, the question arose whether Ukraine could be made liable on an award by reason of piercing the corporate veil between the government and 51 54 For example, under this analysis, the Ninth Circuit’s decision See Ceska Sporitelna, a.s. v. Unisys Corp., No. 96–4152, in Melton v. Oy Nautor Ab should not stand given that the 1996 U.S. Dist. LEXIS 15435, at *12 (E.D. Pa. 10 Oct.1996) respondent in that case had assets in the district and it was (remarking that the general rule is ‘that only signatories to a unreasonable to compel the petitioner to travel to Finland to contract can be bound by an arbitration clause found within get paid. No. 97-15395, 1998 WL 613798, at **2–3 (9th Cir., the contract’); Thomson-CSF v. American Arbitration 4Sept. 1998). Association, 64 F.3d 773 at 776 (2d Cir. 1995) (recognizing five exceptions to the general rule that arbitration agreements 52 do not bind non-signatories: incorporation by reference, 311 F.3d 488 at 498–501 (2d Cir. 2002). assumption, agency, piercing of corporate veil and estoppel). 53 55 The term ‘non-signatory’ has long served as a useful See Sphere Drake Insurance v. All American Insurance 256 shorthand reference to persons whose right or obligation to F.3d 587 at 589–91 (7th Cir. 2001). arbitrate may be problematic, even though the FAA provides for enforcement of an unsigned written provision to arbitrate, 56 such as an exchange of telegrams, emails or sales forms. For a problematic case in this connection, see e.g. Contec Lack of signature does not in itself, however, taint an Corp. v. Remote Solution Co. Ltd, 398 F.3d 205 (2d Cir. 2005) arbitration clause under the FAA. When enforcement under (finding that it was for arbitrators, not courts, to decide the New York Convention is in question, the issue becomes whether a corporation that had not signed an arbitration more complex. Some agreements to arbitration must be clause could compel arbitration). The result in the case may signed, while others need not be. The nub of discord centers be unobjectionable, since the non-signatory was the surviving on punctuation, with the focus of attention on the comma entity from a merger involving a contracting party. Compare preceding the phrase ‘signed by the parties’ in Article II of JSC Surgutneftegaz v. Harvard College, 2005 WL 1863676 the Convention. Some courts interpret the signature (S.D.N.Y. 2005) involving investors’ class action arbitration requirement to apply only to the words ‘an arbitration over dividend policy of a Russian company whose shares agreement’ found just before the comma. Others apply the were evidenced by American Depository Receipts held in New signature requirement to everything in the early part of the York. Here the contest was not about who had agreed to sentence, including reference to arbitral clauses in contracts. arbitrate, but rather the scope of an arbitration clause that The answer may be significant where the Convention provides had clearly been signed by both sides. the only basis for federal courts to exercise jurisdiction. See Kahn Lucas Lancaster v. Lark International Ltd, 186 F.3d 210 at 218 (2d Cir. 1999) (finding that ‘signed by the parties’ applied to arbitral clauses encapsulated in broader contracts as well as separate arbitration agreements).